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Tourism sector depends on domestic tourism for financial recovery - Daily News Egypt

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Tourism sector depends on domestic tourism for financial recovery

Companies have seen shrinking profits through the end of September 2015

A number of tourism companies’ financials, which are listed in the Egyptian Exchange (EGX), suffered from profit shrinkage while others suffered operational losses. Both have been attributed to the turbulence affecting the tourism sector over the past five years.

While the flow of tourists and the service price rates decreased, tourism companies hope for Arab and domestic tourism to increase to lessen the effect of the shortfall.

Tourism companies operating in the Egyptian market have suffered due to the recent tourism crisis, Head of Economic Research at Mubasher Financial Services (MFS) Amr Elalfy said.  According to Elalfy, the financial recovery of the sector depends on increasing prices of tourism services and returning the rate of tourism to 10m tourists per annum.

El-Alalfy said the decrease in the price of services affected the revenues of companies, the decline in the number of tourists, and the occupancy rates in hotels.

Further devaluation of the Egyptian Pound against the US dollar contributes to the increase profit margins for Egyptian companies after they have exchanged their revenues from dollars to pounds.  El-Alalfy focused on the need to develop programmes for domestic tourism through marketing and providing incentive prices and seasonal offers.

Director of Research and petrochemicals at EFG Hermes Ahmed Shams El-Din said the general expenditure rates in the gulf states will not stand stable on their current rates in light of the fall of the price of oil.

Shams El-Din said the resulting depression in gulf economies has had an adverse effect on the rate of gulf tourism to Egypt.

There are 12 tourism companies listed in EGX with a total market value of EGP 6.7bn. The most prominent company is Orascom Development Holding AG (ODHN), which has a market capitalisation of EGP 2.4bn, followed by Egyptian Company for International Tourism Projects (EITP) with a market value of EGP 1.9bn.

Another one of the companies, Americana, has seen their profit margin decline by 10.4% through the end of September 2015, with earning of EGP 157.2m compared to EGP 175.4m in the same period in 2014.

During the first quarter, Misrhotels (MHOT) also recorded a profits. The company recorded EGP 4.9m in profit, compared to a EGP 6.9m in losses druing the same period in the previous year. The company’s revenues have multiplied 79 times, recording EGP 16.2m compared to EGP 205m registered in corresponding period in the year prior.

“We got EGP 16m as compensation for the expropriation of land owned by the company in Luxor during Q1 of the current fiscal year (FY) 2015/2016, which led the company to report a profit,” Chairman of MHOT Ihab El Kerdany said.

He said that media reports on terrorist operations in Sinai impacted the rate of tourism in the region. “News media gives an image to tourists that the entirety of Sinai is plagued by terrorism. However, there are tourist areas that are completely safe,” he said.

Dahab has also suffered financial losses due to the decline Israeli.

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